WORLD TRADE
ORGANIZATION
RESTRICTED
WT/TPR/G/85/VCT
7 May 2001
(01-2221)
Trade Policy Review Body
Original: English
TRADE POLICY REVIEW
SAINT VINCENT AND
THE GRENADINES
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Saint Vincent and the
Grenadines is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Saint Vincent and the Grenadines.
Saint Vincent and the Grenadines
WT/TPR/G/85/VCT
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CONTENTS
Page
I.
INTRODUCTION
5
II.
ECONOMIC AND TRADE ENVIRONMENT
5
III.
TRADE POLICY DEVELOPMENTS
6
IV.
REGIONAL TRADE ARRANGEMENTS
7
V.
ST. VINCENT AND THE GRENADINES IN THE WTO
8
VI.
CONCLUSION
9
Saint Vincent and the Grenadines
I.
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INTRODUCTION
1.
St. Vincent and the Grenadines is an archipelago in the Eastern Caribbean, lying 100 miles to
the west of Barbados. The country is comprised of a main island, St. Vincent and stretching some 40
miles to the south, a chain of 34 islands and cays, the Grenadines. The largest islands in this chain are
Bequia, Mustique, Canouan, Mayreau, Union Island, Palm Island and Petit St. Vincent. The
population is estimated at 111,000, 90 percent of whom are of African descent, while the remaining
10 percent are a mix of descendants of East Indians, European and indigenous people.
2.
St. Vincent and the Grenadines attained political independence from Great Britain on
October 27, 1979 and inherited a Westminster Parliamentary Democracy System of Government. It
holds membership in a number of regional and international organizations and is a founding member
of the Organization of Eastern Caribbean States (OECS). Member countries of the OECS share a
common currency, the EC dollar.
3.
The Government pursues an economic philosophy of private sector led development, with the
role of the State being that of a facilitator. Notwithstanding this, there is an imbalance of employment
between the Government and private sector. The Government’s strategy is to address this imbalance
in the long term. Accordingly, the Government is committed to the development of the basic physical
infrastructure, the social environment, as well as the fiscal and regulatory mechanism to encourage
and promote this type of development.
4.
Given the country’s vulnerability to both external economic shocks and natural disasters, the
Government of St. Vincent and the Grenadines pursues a strategy of economic diversification. This is
intended to lessen the dependence on agriculture, traditionally the mainstay of the economy. Tourism
is growing in significance and has been accorded priority in the new thrust. Financial services and
information technology have also been targeted as new growth areas. Government has also
emphasized human resource development and public sector reform as critical elements to facilitate the
drive towards economic diversification, international competitiveness and sustainable socio-economic
development.
II.
ECONOMIC AND TRADE ENVIRONMENT
(a)
Monetary policy
5.
SVG is a member of the Eastern Caribbean Currency Union (ECCU), which is managed by
the Eastern Caribbean Central Bank (ECCB). The ECCB is responsible for Monetary Policy in the
entire OECS. The Eastern Caribbean Dollar is pegged to the US dollar at a rate of EC$2.71 per US$.
This has remained stable for the last 25 years.
6.
Broad money in SVG grew at an average rate of 4% a year over the period 1997-1999, much
faster growth than nominal GDP. The growth in Broad money reflects mainly the large increase in
deposits held by nationals living abroad, the foreign currency working balances of offshore entities, as
well as increased monetisation of the economy. Increases in private sector credit during the period
were mainly connected to key projects in the tourism and the construction sectors. The net credit
position of the Public Sector remain at around 1999 level, with the increased borrowing by the
Government offset by improvements in the positions of the National Insurance Scheme and other
Statutory Bodies.
7.
There was also little movement in interest rates during the period 1997 – 1999. ECCB rates
for Commercial Banks deposits remained at 5½ - 6%, while lending rates for Commercial Banks were
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Trade Policy Review
kept at 8 – 10½%. The Prime rate for Commercial Banks remained at 10 – 12½% with minimal
movements in other lending and deposit rates.
(b)
Overview of economic performance in the 1990s
8.
The economy of St. Vincent and the Grenadines grew by 2.9 percent per annum on average
during the period 1990 to 1999. Real growth exceeded 5.5 percent in 1990, 1992, 1995 and 1998,
while in the other years it was not so favourable. In the four years of high growth, the economy also
witnessed increases in agricultural output, led by bananas and to a lesser extent, expansion in the
construction and combined services sector. Real per capita GDP during this period increased by
approximately 28 percent, from EC$4,253 in 1990 to an estimated EC$5,450 in 1999.
9.
Notwithstanding the traditional link between GDP growth and performance of the
Agriculture sector, other sectors have begun to emerge in importance within recent times. Most
noticeable are the Construction and Services Sectors. The Construction Sector moved from
9.3 percent of GDP in 1990 to 11.3 percent in 1998. The Services Sector as a group grew in excess of
an average of 5 percent per annum over the last ten years, mirroring the trend of the growing
dominance of trade in services in the international economy.
10.
The period under review witnessed a gradual decline in the Manufacturing Sector’s
contribution to GDP from 8.5 percent in 1990 to 6.9 percent in 1990. This decline resulted mainly
from the closure of a number of large enclave manufacturing enterprises as their competitiveness was
eroded.
11.
The Hotel and Restaurant Sector – used as a proxy for the Tourism Sector grew by an average
of 3.4 percent per annum between 1990 and 1993. In the ensuing years, performance was mixed with
negative growth in 1994, 1996 and 1998 and significant expansion in 1995, 1997 and 1999.
Tourism’s contribution to GDP remained on average about 2.4 percent during the decade.
Notwithstanding the above, gross tourism receipts increased from EC$82.2 million in 1993 to an
estimated EC$202.4 million in 1999, surpassing bananas as the single largest income generating
activity in the economy.
12.
During this period, Government maintained its policy of prudent fiscal management. This
policy resulted in recurrent surpluses in the fiscal operations of the Central Government ranging
between 3.1 percent and 4.2 percent of GDP throughout the 1990s. The recurrent surplus of the
public sector as a whole ranged between 6 and 8 percent of GDP in the period.
13.
Inflation, as measured by the changes in the Consumer Price Index, average 3 percent in the
period with a high of 9.1 percent recorded in 1990 and a low of - 1.8 percent in 1999. The high rate in
1990 was due largely to increases in import prices, wages transport and electricity charges, while a
general decline in the prices of food and clothing accounted for negative inflation in 1999.
III.
TRADE POLICY DEVELOPMENTS
14.
On 1 April 2001 a new Government was sworn in following general elections on March 28.
Enlightened by over twelve (12) months of intense political debate on the comprehensive range of
social and economic development issues facing St. Vincent and the Grenadines, the Government has
adopted and operationalised a National Economic Transformation Programme. The first phase of this
programme is already being implemented and is popularly known as the hundred (100) days plan.
15.
This programme outlines a wide range of policies, which will be used as catalysts in the
process of Macro Economics Transformation and Growth. The programme will focus on an
Saint Vincent and the Grenadines
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aggressive export oriented, private sector led development strategy, which will be fully reinforced by
efficient import substitution initiatives. The changing nature and volatility of international economic
relations and the relatively greater vulnerability of small economies like ours in the new global
environment makes it mandatory that St. Vincent and the Grenadines redoubles its reliance on that
outward looking approach to trade and development. This approach is facilitating the participation of
St. Vincent and the Grenadines in the deepening and widening of the Regional Integration process as
a means of survival.
16.
It also allows us to build the capacity and create the conditions to facilitate adequate
responses to the new requirements of Universal Efficiency and Global Competitiveness. It further
requires that St. Vincent and the Grenadines create the institutional capacity to honour the
commitment and obligations undertaken in Bilateral Regional and Multi-lateral Trade Agreements.
17.
The Economic and Social Transformation programme launched by the new Government will
be implemented on a sound institutional framework. This includes a social partnership between the
Government, the Private Sector and Labour – Trade Unions constitution a Tripartite Committee. The
primary objective of this group is the achievement and maintenance of sustainable macro economic
growth and development through a process of cooperation in economic management among the three
major partners.
18.
There has also been established a broad base National Economic and Social Advisory
Council. This is made up of Public and Private Sector officials, NGO’s and other Civil Society
Partners who will act as the Prime Movers in the Economic Transformation Programme.
19.
Finally a Cabinet Committee on the Economy comprising Ministers and Technical experts
from the main economic growth sectors has been established. From this committee overall direction
would be provided to the transformation programme.
20.
This institutional framework would allow for greater private sector participation and initiative
in the national effort to achieve international competitiveness especially in those areas that can serve
as catalysts for the diversification of the production and export base and the modernization of the
economy. In this respect WTO matter has been given high priority and would receive special
attention in all of the committees established.
IV.
REGIONAL TRADE ARRANGEMENTS
21.
St. Vincent and the Grenadines participates actively in a number of Regional Trade
Arrangements including the Organisation of Eastern Caribbean States (OECS), and the Caribbean
Community (CARICOM). These arrangements have worked as proactive attempts by regional
governments to integrate their economics in order to compensate for the diseconomies of size, scope
and space. By effective co-ordination and convergence of Macro Economic Policy the region is able
to present a united front to the rest of the world.
22.
To St. Vincent and the Grenadines the OECS is the primary and single economic space in
which, all possible economies of scale and scope can be maximized. The OECS is the initial platform
for an efficient payment system, enhanced mobility of labour and capital and deeper policy coordination. Monetary policy in the OECS has been successfully co-ordinated and centralized under
the ECCB. The main objective is to maintain a strong Eastern Caribbean Dollar in order to provide
the stability and the certainty required in the present Economic Policy Environment.
23.
In recognition of the importance of wider economic integration the membership in the
Caribbean Community (CARICOM) is a second platform for fostering stronger economic ties with
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the rest of the Caribbean and overcoming more of the difficulties associated with smallness.
St. Vincent and the Grenadines is a member of CARICOM since its inception in 1973. Cognizant of
the very small size of OECS economics the larger member states of CARICOM have accorded special
and differential treatment to these economies through Article 56 of the CARICOM Treaty. This
mechanism has served the region well and has allowed for trade development and expansion on an
equitable basis throughout the entire region.
24.
The cord, which binds CARICOM together, has been the Common External Tariff. In order
to prepare CARICOM Economies for international competition and provide an adequate adjustment
period for capacity building and enhancement, the region embarked upon a programme of unilateral
trade liberalization in 1992. A phased reduction of the CET was agreed to in which by 1999 member
states would have CET rates ranging from 0 – 20’s with 40% for agricultural goods. St. Vincent and
the Grenadines had successfully implemented this programme by 1 January 1998.
25.
St. Vincent and the Grenadines does not apply any restrictions on the entry of goods of
CARICOM origin except as provided for under Article 56 of the Treaty.
26.
The fifteen members of CARICOM are all committed to deepening of this regional
integration movement. St. Vincent and the Grenadines participates in this “work in progress” for the
creation of a CARICOM Single Market and Economy through incorporation of nine legally binding
protocols.
27.
In order to expand trade between CARICOM and neighbouring countries in the wider
hemisphere CARICOM has concluded preferential trade agreements with Venezuela, Colombia and
the Dominican Republic. These agreements allow for nonreciprocal trade between these countries
and the small economics of the OECS. To date St. Vincent and the Grenadines has not been able to
use this special and differential measure to its optimal benefit.
V.
ST. VINCENT AND THE GRENADINES IN THE WTO
28.
St. Vincent and the Grenadines became a GATT Contracting party on 18 May 1993 under
Act XXVI:5 (c) with its rights and obligations retroactive to the date of National Independence on
27 October 1979. On 31 January 1995 St. Vincent and the Grenadines signed the final Act of the
Uruguay Round Agreement and became a member of the WTO.
29.
To date however, the legislative action necessary to incorporate the WTO Agreement into
national law has been inadvertently overlooked. Technical assistance is urgently required to assist in
undertaking this task.
30.
St. Vincent and the Grenadines was affected in the implementation of WTO Agreements by a
number of factors including limited financial resources and technical personnel.
31.
Notwithstanding the scarcity of technical and institutional resources, St. Vincent and the
Grenadines is committed to honouring its obligations under the WTO. To this end an Inter
Governmental Committee has been set up and has initiated the work to bring national legislation in
compliance with WTO disciplines.
32.
To date, with assistance from the World Customs Organisation the WTO Customs Valuation
Agreement has been adopted. A Fair Trade Competition Act has also been established.
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33.
A National Regulatory Authority for utilities would be established as well as a Fair Trade
Commission with quasi-judicial powers. It is also envisaged that the Magisterial Court would be
expanded to include a Commercial Court to facilitate in the adjudication of commercial disputes.
34.
St. Vincent and the Grenadines has not participated in the on going efforts and decisions to
formulate a WTO agreement on Investment. We wish to focus our attention on the technical
assistance and support required to implement the present WTO commitments. On the matter of Trade
Related Investment Measures however work is on going at the CARICOM level to harmonise
investment incentives among Member States. The importance placed on attracting foreign investment
to St. Vincent is increasing, as is the competition from other countries and regions.
35.
Since becoming a member of the WTO, St. Vincent and the Grenadines has not been able to
meet its notification requirements under the various WTO agreements. A concerted effort has been
made to acquire training in this area. Also in the restructuring of the Ministry of Trade additional
personnel will be recruited to assist. In March of this year work commenced in this area, and
notifications will be submitted to the WTO before the TPR meeting in June.
36.
The Trade Department, which is responsible for WTO matters, has eight staff members who
have to shoulder all the daily tasks of running the entire department. WTO matters are new and
increasing daily for the country. It is therefore recognized that immediate and comprehensive
responses from St. Vincent and the Grenadines in honouring its WTO commitments is severely
constrained by inherent financial, technical, institutional and human limitations. In this reality
St. Vincent and the Grenadines must request of its more fortunate WTO partners assistance in
receiving technical support and extended implementation time frames.
37.
As a Small Island Developing State, St. Vincent and the Grenadines is committed to the
process of Trade Liberlisation and integration into the new global economy. It is also committed to
the real need to place on the multilateral agenda of the WTO the special and differential treatment that
we require to survive on such an uneven playing field.
38.
While St. Vincent and the Grenadines has not realised trade benefits as a result of the
Uruguay Round Agreement, the Government remains committed to the multilateral trading system.
We recognize the need to strengthen our domestic institutions and empower the private sector to
overcome threats and to take advantage of the trade opportunities that have been created under this
new system. These benefits can only be achieved through active participation and keeping abreast of
new trade developments. St. Vincent and the Grenadines would seek to establish better representation
in Geneva in the years ahead.
VI.
CONCLUSION
39.
St. Vincent and the Grenadines recognizes that the process of trade liberalization is inevitable
and that serious attention must be placed on restructuring of the economy to meet this challenge. The
export led growth model based on bananas continues to receive severe shocks. As a result attempts
are being made to diversify the production and export base and create the environment conducive to
attracting and increasing investment; fostering private sector growth and increasing levels of
productivity.
40.
St. Vincent and the Grenadines is aware that if the international competitiveness of the
agricultural; sector is improved we would continue to benefit from the export potential in traditional
agricultural markets. This could only be possible if a WTO waiver of the LOME and Cotonou
arrangements is endorsed by the members and receives continued support.
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41.
On the other hand, our experience to date with the labour intensive services sector has been
promising. More emphasis is now being placed on services such as Tourism, Telecommunications,
Information Technology and Financial Services as the new growth sector and the major contributors
to GDP. As the country seeks to develop these services sectors, it has created an environment
conducive to Foreign Direct Investment and greater Private Sector Participation generally.
42.
Nevertheless, our ability to achieve economic growth and development through such exportoriented strategies will depend primarily on the outcome of negotiations at the intra regional,
hemispheric and multilateral levels. It will also depend on the intensity and frequency of
unfavourable advisories and black listings handed down by developed countries on our vulnerable
services sectors and our ability to withstand and respond to such challenges.
43.
St. Vincent and the Grenadines remains committed to full and eventual integration to the
liberalized global economy.
44.
However because of the small vulnerable and open nature of the economy as well as the
severely limited resources, a gradual and carefully monitored pace of voluntary compliance with
WTO discipline is preferred. This approach allows sufficient time to undertake capacity building
initiatives, benefit from the technical assistance available and achieve the productivity enhancement
required for international competitiveness.
45.
The assistance and support of all our WTO partners is urgently required for Small Island
Developing States like St. Vincent and the Grenadines to survive and prosper in the increasingly
hostile global environment.
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